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How To Start A Franchise

Learn The Ins and Outs Of Starting A Franchise Business

For emerging entrepreneurs thinking about starting a franchise, there are a number of critical steps necessary to get from the dream of owning a turn-key operation to actually holding your grand opening and making that first sale. We have gone over the top franchises and compiled a list of all of the steps needed to start a franchise.

Why should you start a franchise?

Starting a franchise is streamlined to maximize profitability. This takes the hassle out of starting a business from scratch. Training, branding, operations, and an all-important support network are already built into the franchise model. This makes starting a franchise ideal for emerging entrepreneurs, as well as experienced business owners who want to hit the ground running without spending much time laying a foundation.

Make A Budget And Stick To It

When starting a franchise business, it is important to understand that there is an entry fee and a total franchise cost. Some franchises, for example, can be run out of the home and have very little overhead. Starting a small scale franchise like this usually entails a cost for branding, training, marketing materials, and access to the franchisor’s support network. On the other hand, when people ask how to start a franchise in the hotel industry, the buy-in fee can be upwards of $5 million, including construction, hiring and training staff, logistics, advertising, licenses, zoning permits, supplies, and everything else. If a particular franchise interests you, check out what the total cost is, and match it against your budget. You may need to seek additional financing to start a franchise business, but there is no sense going into massive debt to start a franchise, only to have the majority of your revenue going to pay off bank loans.

Choosing a Franchise

Essentially, the path to starting a franchise is fairly universal. We will get into the specifics as the article progresses. Because the franchise business model is standardized, one of the biggest decisions to make is what type of franchise to start. One of the best ways to start narrowing down your options is to make a list of things you enjoy or things you excel at doing. If you enjoy food, take a look at the various restaurant franchises available. If you like the satisfaction of making guests happy, maybe a hotel franchise is in your future. Travel, electronics, landscaping – there are franchises that appeal to every hobby and niche. Start off with your list of interests, and get ten or twenty franchises and start narrowing down the options. There are hundreds of franchises spread across every industry imaginable.

Not All Franchises Are National

It is important to realize that some of the most profitable franchise brands are not national. One can easily point to the golden arches as an example of how starting a franchise can turn into a national, or global, empire. But the truth is they are the outlier among franchises. Franchisors do a lot to research market viability, and the truth is that some franchises in certain regions of the United States are not sustainable in other geographic locations. Additionally, in some towns, a national brand may lose money to more regionally popular franchises, or even traditional mom and pop businesses. Before starting a franchise, take a look at how national brands perform in your area against local or regional franchises in the same or similar fields. Also keep in mind that new and regional franchises also have a lot of potential for growth and revenue, as their customer bases are still being tapped. When starting a franchise, it is important to remember that bigger brand recognition does not always guarantee success.

Look Around Your Town

Sometimes getting ideas for starting a franchise can be as simple as driving to your immediate location. If your town already has a number of fast food places, then the market may already be saturated. If you live in a more urban area, the chances are pretty good that there will not be much of a market demand for landscaping and lawn care. Take stock of what is around you, and also what does not exist. Starting a franchise in an untapped market that also has a great demand can be extremely successful. Talk to people. Check local listings to see what people are putting in their want ads. If you can figure out what your area wants, and what industries are growing, it will help you figure out what franchise you should start. Finding those niche markets can be list striking a vein of gold when starting a franchise.

Look At Yourself

Before starting a franchise, figure out what motivates you to be successful. Look beyond the money, because, quite honestly, that’s why most people start a franchise. But there is more to it than just money. Do you want to grow your franchise operation? Is customer satisfaction and validation what drives you? Some people start a franchise because it is a very viable career, with many franchisees retiring happily after many successful years. For a few people, starting a franchise turns into a family business, with the same location passing through generations of ownership. On the other side of the coin, there are people who start franchises to get a better understanding of entrepreneurship, and it becomes a stepping stone to move onto starting business ventures of their own, from the ground up. Before starting a franchise, sit down with a pen and paper, and write out a list of our biggest motivators. This will help you figure out what type of franchise to start, and how big of an operation your want to undertake.

Do Not Bite Off More Than You Can Chew

Some people start a franchise with dreams of building an empire with multiple establishments covering a wide geographic territory. However, not everyone wants to emulate Ray Kroc. Some people want to start a franchise that is small and manageable. Smaller operations are great, especially for those who have never owned or run a business in their lives or are new to the franchise business model. When choosing a franchise to start, keep in mind how big of an operation you feel comfortable with. For those looking at hotels, it will mean running an operation with a workforce in excess of a hundred people. On the other end of the scale, there are people starting franchises in the travel industry who run the entire operation out of a home office with a laptop and a phone. Also, a franchise operation always has room for growth. Sometimes it is better to start a small franchise and expand as the volume of business increases, instead of starting off big and realizing you are in over your head.

Assess You Management Style

Before starting a franchise, potential owners need to assess their individual management styles. The franchise business model may be the same across all brands and industries, but the managerial requirements are different. Obviously smaller franchises – such as those run out of a home office – will require a more “hands-on” approach to managing. Others, such as a cleaning franchise, for example, so not require franchise owners to be on the front lines every single day. Employees do their jobs, while the franchisee works in sales, logistics, and accounting. There are franchises to accommodate every managerial style, from being directly involved to taking a more high-level approach to ownership.

Start A Franchise That Plays To Your Strengths

In addition to starting a franchise in an industry and field you enjoy, you should also consider one that allows you to draw upon your best assets, or use your knowledge. If you prefer a more service-oriented atmosphere than one that deals solely in products, there are franchises to suit those strengths. If you work well with numbers and data, there are tax and accounting franchises. If you do better in a sales position, there are franchises to fit your ability to persuade people. Not every franchise is going to be tailored to fit everyone’s specialties, but with enough browsing, you will be able to find some very close matches.

Research Your Franchise

There are many resources online that people can use to see all of the financial requirements needed to start a specific franchise. Starting a franchise – financially speaking – goes well beyond what you are willing to spend. When researching how to start a particular franchise, it should be noted that some require potential owners to have a certain net worth. If that requirement is outside of your financial comfort zone, then it might be time to look at starting a franchise in another field. Remember that starting a franchise is supposed to be a win-win for the business owner and the franchisor alike, and if you are going to be financially unstable by putting yourself outside of your budget, then neither party will be successful. The only difference is that the franchisor will be able to move on to another entrepreneur, and you will be stuck with a lot of debt and broken contracts.

Talk With Other Franchise Owners

If you are thinking about starting a franchise, sometimes it is best to talk with other franchisees to get their perspective. They will give you an idea of how long it takes to start a franchise from the initial application to being able to make sales; how much of their own money was required, if they needed additional funding and where they got it; how long it took from the initial investment to turn a profit they could put in the bank, and what the franchise support network is like. Franchisees are usually very candid with their responses, and it will give you a good idea about how to start a franchise, and if this is the particular franchise business you want to own.

Talk With The Franchisor

There is nothing wrong with talking with a franchise representative in order to figure out what it takes and how to start a franchise business. They will tell you directly what they are looking for in candidates, how much money is actually needed, what your net worth should be, and what kind of support they will offer first-time franchise owners. It also never hurts to put in some face time to make an initial impression and let them know you are interested. If anything, the franchisor will supply you with some guidelines on how to start a franchise and what they offer business owners.

The Official Interview

At some point, the franchisor will arrange an interview to see if you are eligible to start a franchise operation of your own. Depending on the type of franchise you are interested in, the interview could be a simple phone call, a few e-mail exchanges, or they may want you to visit their headquarters or branch office. No matter how it occurs, both parties will be able to get down to brass tacks about what is required, how much money is needed upfront, what the renewal fees are, and what the onboarding process is.

Get A Franchise Disclosure Document

The Federal Trade Commission demands that franchisors give a franchise disclosure document (FDD) to anyone looking to start a franchise of their own. The FDD provides full transparency to potential franchise owners. An FDD will lay out everything required of the franchise owner – from the initial expenditures, hiring methods, operations, and sales, to the amount required to stay enrolled in the franchise system. This is not a one-way street. The franchise disclosure document also details what the franchisor will provide to the franchisee. It is important to get an FDD before signing any agreements or spending any money on starting a franchise. Everything from the big picture down to the fine print is laid out in the franchise disclosure document, which leads us to our next point.

What is an FDD?

An FDD (franchise disclosure document) gives full transparency to franchisees about how the company is run, any financial obligations, non-compete agreements, and anything else involved in starting a franchise. Going back to the 1970s, the Federal Trade Commission placed standards and guidelines by which all franchises operate in the United States. The franchise disclosure document prevents illegal activity for all parties involved, and keeps competition healthy between franchise companies.

Get An Attorney

After the research, the financial planning, and the official interview, the franchisor will make a contractually binding offer. At this point – before signing your name to anything and starting your own franchise – enlist the services of an attorney. Keep in mind that not every attorney is familiar with starting a franchise. Do your research. There are attorneys who specialize in starting franchises, and are familiar with state and federal regulations regarding what is required of potential franchise owners. A franchise attorney will be able to tell you what to expect from the franchisor, as well as what you have to do in order to stay within the guidelines of franchise agreement. Let them go over the contract and have them explain to you what is legally required of you, what you are not allowed to do, and if there is anything in the fine print that might be a hindrance later on down the road. Have the attorney go over the franchise disclosure document (see above) and explain what each section means without any of the legalese. While starting a franchise requires these contracts, the language is not always set in stone. If you feel any point needs to be clarified, or if you want to attempt to negotiate anything, work with your attorney and reach out to the franchisor.

Financing Your Franchise

When starting a franchise, one of the biggest steps after the agreement has been signed is to have a plan for financing the operation. Financing is where a lot of franchise operations differ. Some franchisors will match or provide a certain percentage of financing to people starting a franchise. Others will offer discounts from suppliers, vendors, and equipment providers. After that, it is up to the franchisee to seek the appropriate financing. The best approach to starting a franchise is to break down the financing into groups. To start a franchise that has a physical location – such as a restaurant – franchisees will need commercial real estate financing. This may even require construction financing, as some franchisors need locations built to their corporate specifications. Equipment leasing may also be necessary, as well as regular working capital to purchase supplies and inventory, or any other expenses needed to start the franchise. Many of these expenses can be partially financed through small business loans. Other costs, such as construction from the ground up, may need specialized commercial financing to get the best terms and rates for new franchise owners. There are also loans and funding programs specifically geared toward financing new franchises. Again, the type of financing needed hinges entirely on the size and requirements of the franchise you want to start. Talking with your franchise representative, going through the requirements of the franchise agreement, or talking with other franchise owners will give you a good idea of the kind of financing you need to start a franchise successfully.

Before Opening Day

Once everything is in order, it is time to announce that you are starting a franchise. Many franchisors will help with advertising, because if you are starting a franchise, you are adding to the brand’s revenue, as well as expanding their territory. However, there are also inexpensive ways to let the public you are starting a franchise. Creating profiles on social media accounts are always a great way to get the word out, as well as receive valuable feedback from customers. Many of the larger franchisors now have guidelines for social media interaction, and usually have assets – such as logos, banners, and even special offers – to build a social media presence. Taking out ads in local papers, placing notifications on bulletin boards in your city or town, and even handing out fliers can make a huge impression and have customers lining up for your grand opening. Even in this digital age, pounding the pavement can sometimes reach more people, locally, than posting online. Starting a franchise sometimes requires franchisees to be their own marketing departments. As always, most franchisors will supply branding and marketing materials, but sometimes you need to do the legwork yourself.

Own And Operate A Commercial Finance Business

If you are serious about starting a franchise to achieve success and financial independence, consider the Commercial Capital Training Group Program. The Commercial Capital Training Group (CCTG) is very similar to a franchise in that it offers in-depth training and an extensive support network comprised of individuals with decades of experience. But that’s where the similarities end. CCTG gives you the opportunity to own your own business, create our own branding, and have limitless earning potential in the world on commercial finance. We will show you how to bring business owners and lenders to the table so they can come to an agreement, and how you can walk away with not only a share of that deal, but how to create recurring residual income from those contracts. On top of that, we will actively promote your business so that clients come to you for their financial needs. Many graduates from our program make more from a few deals through our recession-proof business model than most traditional franchise owners make in a few years. All business owners need money. Lenders have the funding that business owners need to launch and sustain their operations. The Commercial Capital Training Group will teach you to be the intermediary between those parties and how to get your fair share for making the magic happen. If you ever dreamed of owning a business that is much like starting a franchise, but with the added perks of limitless profitability, and a business you can call your own, take a look at what the Commercial Capital Training Group can do for you today.

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